Original Post Date: Monday, September 24, 2012

The purpose of this blog is to describe the role Value Engineering plays within the affordability process. The blog is not a step by step “How To Conduct or Execute” Value Engineering (VE) but, it is a discussion of the context, input, setup, execution hints, and output of Value Engineering in support of conducting affordability analysis and management. As such, it is important to understand the concept of affordability within the Systems Engineering paradigm. This blog is designed to provide insights, lessons learned, and suggestions for using Value Engineering in the affordability process. In subsequent blogs, I will describe the step by step process for integrating Value Engineering in the Systems Engineering Affordability process.

Systems Engineering is a primary source of multidisciplinary information for the systems engineering and management of products and services, and processes of all types.               

Systems Engineering activities involve:

  • Defining the system (identifying user requirements and technical specifications)
  • Developing the system (conceptual architectures, tradeoff of design concepts, configuration management)
  • Integrating new systems with legacy systems
  • Deploying the system (operational test and evaluation, maintenance, and reengineering)

Modern systems, including both products and services, are often very knowledge intensive, and are found in both the public and private sectors.

Affordability is an abstract term that most people think they understand but have difficulty defining or explaining.  The Department of Defense acquisition regulations require program managers to address affordability, detail affordability constraints, and achieve affordability during the procurement of new systems without providing a definition or even a clear idea of what affordability means.  The Department of Defense has difficulty in defining affordability and therefore, it is no wonder that program managers have difficulty understanding or explaining the term.  Perhaps the process of selecting an affordable product or service will yield some insights.

How do consumers know when they can afford a product or service?  Normally, people treat affordability as a product price attribute that is proportional to their ability to pay that price.  If buyers use this traditional ability-to-pay measure of effectiveness, they can say, “no, it is not affordable,” if the price is too high.  On the other hand, they might be able to say, “yes, it is affordable,” if it fits their budget and performs what they need when they need it.  People expect something of value in return for what they spend.  Simply stated, they expect their purchase to perform as required when required, and they cannot bear the situation when it does not.

Program Management Offices are faced with numerous cost estimating, cost analysis, budgeting, and cost tracking activities throughout the acquisition life of a program. At each acquisition stage, TruePlanning's life cycle approach to Program Affordability Management and Value Engineering enables agencies and government program offices to minimize risk and cost, deliver better value to the taxpayer, accelerate project processes, and improve the efficiency and effectiveness of project selection, control, and delivery.

With TruePlanning®, organizations can restore affordability and value engineering to defense programs through more credible estimates, streamlined proposal review processes, defensible cost analysis and greater overall accuracy to ensure future funding and program success at every decision gateway.